Jeffrey B. Cohen

Jun. 24, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- Mayor Eddie A. Perez has put a temporary hold on a controversial plan to save the city millions by drastically increasing health insurance premiums for some city and school retirees.

On Monday, Perez announced a 30-day moratorium on the higher health insurance rates that were to have saved the city $2 million in the first year. He said the moratorium will let the city "further review and analyze data on the impact this change will have on city retirees and the city budget."

But some members of the city council, such as Councilman Pedro Segarra, question whether 30 days is enough time to clean up the "mess" the city made for itself.

"I don't think anyone anticipated that it would turn out this way," Segarra said. "I think it turned out this way because the departments that were supposed to do the due diligence didn't do it the way it needed to be done."

The idea to save money by charging city and school retirees and their family members more for their health insurance was an unpopular move with retirees when it was announced this spring. Since then, retirees have complained that they've gotten bad information, not enough information, or no information at all.

Last week, City Manager Lee Erdmann said that "things have not gone as smoothly as we had hoped they would." He acknowledged that people who don't owe money for health insurance got letters saying they did; that the dollar figures on letters sent to people who do owe money can't be trusted; and that hundreds of retirees may not find out about the rising health care costs until shrunken pension checks flow into their accounts this month.

The city has long self-insured for medical, prescription drug and dental benefits. That means that while Anthem Blue Cross Blue Shield administers the current health plans available to the roughly 15,000 to 16,000 city and school employees, retirees and their dependents, the money it uses to pay claims comes from a city health insurance account.

But the city and the school system can no longer afford to fund health care at the current level, which could be as high as $90 million next year.

To recoup some of the cost, the city and schools decided to have retirees pay more for their health benefits, a change that could affect as many as 4,400 people. Retirees over 65 and their dependents were given a choice: stay with their current Anthem health plan and pay higher rates or switch to a private, Aetna-administered (NYSE:AET) , Medicare-affiliated program that has lower premiums than the new Anthem plan, but potentially higher prescription drug costs. Those not yet eligible for Medicare had no option but to stick with the Anthem plan and pay the higher costs.

On Monday, Perez announced he'd step back and take another look. His moratorium doesn't apply to school retirees, but school spokesman David Medina said the schools are considering the same approach.

"It's been recommended that we match the city," Medina said, but School Superintendent Steven Adamowski hasn't yet made that decision.

Members of the city council agreed that the moratorium makes sense. "We need to clarify the potential errors that may have been committed," said city council President Calixto Torres. "If we need more time, we'll certainly make sure that enough time is provided so we can try to correct whatever concerns or mistakes or formulas that need to be modified."

But, Torres said, time is money. And each month the city delays is money it isn't saving, and money it didn't budget for.

"That's something we'll have to grapple with," he said.

Contact Jeffrey B. Cohen at jcohen@courant.com.

Newstex ID: KRTB-0083-26189646